regional strategies for industrial areas_en.pdf

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DIRECTORATE-GENERAL FOR INTERNAL POLICIES

POLICY DEPARTMENT B: STRUCTURAL AND COHESION POLICIES

REGIONAL DEVELOPMENT

REGIONAL STRATEGIES FORINDUSTRIAL AREAS

NOTE


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This document was requested by the European Parliament's Committee on RegionalDevelopment.

AUTHORS

DI. Herta Tdtling-Schnhofer - Metis GmbHDr. Sara Davies - EPRC

RESPONSIBLE ADMINISTRATOR

Dr. Esther KramerPolicy Department B: Structural and Cohesion PoliciesEuropean ParliamentB-1047 BrusselsE-mail: [email protected]

EDITORIAL ASSISTANCE

Nra Rvsz

LINGUISTIC VERSIONS

Original: EN.Translation: DE.

ABOUT THE PUBLISHER

To contact the Policy Department or to subscribe to its monthly newsletter please write to:[email protected]

Manuscript completed in January 2013.Brussels, European Union, 2013.

This document is available on the Internet at:

http://www.europarl.europa.eu/studies

DISCLAIMER

The opinions expressed in this document are the sole responsibility of the author and donot necessarily represent the official position of the European Parliament.

Reproduction and translation for non-commercial purposes are authorized, provided thesource is acknowledged and the publisher is given prior notice and sent a copy.
mailto:[email protected]:[email protected]://www.europarl.europa.eu/studiesmailto:[email protected]://www.europarl.europa.eu/studiesmailto:[email protected]


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DIRECTORATE-GENERAL FOR INTERNAL POLICIES

POLICY DEPARTMENT B: STRUCTURAL AND COHESION POLICIES

REGIONAL DEVELOPMENT

REGIONAL STRATEGIES FORINDUSTRIAL AREAS

NOTE

Abstract

Urban areas with a legacy of old industries have faced large-scale investmentneeds in the regeneration of derelict land, rehabilitation of housing and infrastructureand in addressing ecological challenges, in addition to massive changes in economicactivities and jobs. Cohesion policy has contributed to rehabilitation and newdevelopment. These regions depend on national and European industrial policy as

well as on the capacity of local and regional actors to plan and develop a new andamenable space and a base for future economic development. This briefing noteexplains how urban areas like Manchester, Essen, Lille and Bilbao have masteredreconversion. In the future, urban areas could greatly benefit from the newpossibilities offered through the Integrated Territorial Investment foreseen for theupcoming Cohesion policy period, 2014-2020.

IP/B/REGI/FWC/2010-002/LOT1-C01-SC08 2013

PE 495.848 EN


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____________________________________________________________________________________________Regional Strategies for Industrial Areas

CONTENTS

LIST OF ABBREVIATIONS 5LIST OF TABLES 7LIST OF FIGURES 7EXECUTIVE SUMMARY 91. ECONOMIC, SOCIAL AND ECOLOGICAL CHALLENGES OF

STRUCTURAL TRANSFORMATION 131.1.The significance of industry 141.2.Definitions and concepts 151.3.Reconversion and restructuring in old industrial regions 17

1.3.1. Challenges for industrial regions 171.3.2. Theoretical approaches concerning the transformation of old

industrial areas 191.3.3. Regional policy approaches 20

2. POSSIBILITIES OF FUNDING IN INDUSTRIAL AREAS UNDERSTRUCTURAL FUNDS 232.1.Cohesion policy and industrial reconversion policy 232.2.Examples of the use of Cohesion policy for industrial areas 25

3. ILLUSTRATIVE EXAMPLES HOW CITIES HAVE USED STRUCTURALFUNDING TO TACKLE STRUCTURAL CHANGE IN INDUSTRIAL AREAS 293.1.Manchester 30

3.1.1. Strategy for urban development 313.1.2. Transformation in regeneration and development areas 323.1.3. The context and role of Structural Funds 33

3.2.Essen 343.2.1. Main features of the conurbation 343.2.2. Urban development strategy 353.2.3. Major site developments 353.2.4. Support for a diversified service industry 363.2.5. Focus on culture and creative industries as signal for change 363.2.6. Cooperation at regional level 373.2.7. Focus of the RCE programmes 37

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Policy Department B: Structural and Cohesion Policies

3.3.Lille 383.3.1. Main features of the conurbation 383.3.2. Lille as a major case of urban renewal 393.3.3. National and international policy frameworks supporting transformation 403.3.4. Urban economy and major development efforts 413.3.5. Regional Cooperation for industrial heritage 423.3.6. Corresponding ERDF programme 43

3.4.Bilbao 433.4.1. Major institutional drivers in the pathway to recovery 443.4.2. Master plan with a project-based regeneration approach 443.4.3. Economic restructuring 453.4.4. Renewal of deprived neighbourhoods 453.4.5. Culture as major signal 453.4.6. The Role of Cohesion policy 46

4. CONCLUSIONS AND RECOMMENDATIONS 474.1.Industrial policy to support diversification at regional level 474.2.Specific support for old industrialised regions 484.3.Examples for successful conversion strategies and future

integrated territorial investment for the 2014-2020 period 514.4.Integrated territorial investment and sustainable urban development in the new draft regulations 54

ANNEX 59REFERENCES 61

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LIST OF ABBREVIATIONS AGMA Association of Greater Manchester Authorities

ANRU Agence Nationale pour la Rnovation Urbaine

CF Cohesion Fund

CIADT Government Committee for French Development and Planning

COMIN Competence centre for information and communication technology

COPIT Confrence permanente intercommunale transfrontalire

CPP Community Planning Partnership DCLG Department for Communities and Local Government ECSC European Coal and Steel Community

EGF European Globalisation Adjustment Fund EGTC European Grouping for Territorial Cooperation ERDF European Regional Development Funds

ESF European Social Funds

EURATOM European Atomic Energy Community

FI Flagship Initiative

GDP Gross domestic product GMCA Greater Manchester Combined Authority NACE Statistical Classification of Economic Activities in the EU

NWOP North-West England OIR Old industrialised regions

PNRU Programme National de Rnovation Urbaine PPP Public-Private Partnership R&D Research and Development RCE Regional Competiveness and Employment

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RIS Regional innovation systems

RTDI Research, Technological development and innovation

SCOT Schma de Cohrence Territorial

SME Small and medium-sized enterprises

TFEU Treaty of the Functioning of the European Union

TGV Train Grande Vitesse

UDF Urban Development Funds

ZUS Zones urbaines sensibles

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LIST OF TABLES

TABLE 1 Cohesion policy support for industrial reconversion by Fund in 2007-13 24TABLE 2 Overview of the NW-OP 33TABLE 3 Overview of the NRW-OP 38TABLE 4 Cohesion policy budget allocations by theme and Member State in 2007-13 (percentage of total) 59

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LIST OF FIGURES

FIGURE 1Overview of industrial policy approaches 16

FIGURE 2The concept of an ITI 56


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EXECUTIVE SUMMARY

European industry contributes to output, jobs, innovation and exports and amounts to 16%of the EU GDP. Manufacturing historically has been the driver of economic growth andstructural change. During the financial and economic crisis governments provided short-

term help to ailing industries, (such as steel producers and car manufacturers), and at thesame time arguments for a more active industrial policy were raised. Thus, a combinationof the Europe 2020 strategy and the crisis has triggered new efforts in European industrialpolicies; efforts that also aim to involve the Cohesion policy. The Flagship Initiative on

Industrial Policy: Reinforcing competitiveness combines horizontal measures likeincreased R&D and innovation efforts in renewable energy and raw materials, andsustainable production methods, with sectorally targeted strategies for lead industries suchas biotech, pharmaceutical, and ICT. The most recent EC Communication A strongerEuropean Industry for Growth and Economic Recovery Industrial Policy Update calls forcombined actions for a Third Industrial Revolution, based on a shift towards renewableenergies and internet technologies to transform power grids into smart grids, new growth

and development, emanating from conversion of buildings and production, and leading to anew wave of creation of jobs, goods and services - and wealth.

Not all regions face the same conditions in their effort to achieve growth and technologicaldevelopment. Even if income levels are comparable, the possibilities to attract public andprivate investment for modern infrastructures, services and innovative enterprises, skilledlabour and high living amenities might differ significantly. Especially a legacy of traditionalindustries based on coal, steel, textiles or machinery that had provided for prosperity overseveral decades, often militates against the conditions required for structural change andgrowth. Such regions are located in Member States with high industrial shares (the North-West of England with Manchester and West Midlands with Birmingham; the Ruhr Area with

Essen, Dortmund, Bochum, etc; the Basque Country with Bilbao; Northern France with Lille,etc). Also in the Eastern parts of Germany, in the Czech Republic, Poland and Slovakiacentral planning has left similar, if not worse problems.

Traditional industries have often bequeathed a culture of dependency on large firms, aweak tradition of entrepreneurship, derelict sites and buildings, oversized infrastructuresand polluted environments with low amenities. Much effort has been made since the 1980s,and many of the regions diversified their economic base, cleared up the dereliction,invested in social housing and improved the environment. However, municipalities andcities often lack the resources which are still required to continue and completerehabilitation, and also for addressing the crucial human factor: skills, entrepreneurship,

and attitudes are difficult to change within a few years.

In the 1970s and 1980s old industrialised regions were at the heart of Regional policy.However, with the enlargement of the EU, on the one hand, and the slow recovery of someof the areas on the other, this type of regional problem has ceased to be a focal point forpolicy makers. The crisis has put again the spotlight on these regions, but only in the shortterm. Competing for scarce public funds, including Cohesion policy, would be more difficultfor these regions, as other regions could show quicker and better results of supportreceived from development policies. Especially the focus on RTDI in Cohesion policy and thereluctance to designate specific regions as eligible for funding, has improved the position ofregions without industrial legacy in competing for public funds. However, in the absence of

any data on territorial allocation of Cohesion policy funds, no figures are available tosupport this hypothesis.

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Support for the reconversion of old industrial areas is provided through Cohesion policy andnational and regional or urban economic development policies. EU Regional Aid Guidelinesallow for subsidies in specifically designated regions under certain conditions. ThoughCohesion policy cannot change the overall competitiveness of industries, it may supportvery important measures to assist old industrialised regions in finding new development

paths. These include the rehabilitation of physical infrastructures, the raising of skills,qualifications and entrepreneurship, enhanced connectivity, as well as institutional andcultural factors. An important dimension of Cohesion policy is the approach towardssustainable urban development. As a horizontal theme ESF and ERDF may combine variousmeasures to support rehabilitation of urban areas. Relevant tools include JESSICA, afinancial instrument, and URBACT a programme for exchange of experience.

With the Leipzig Charta on sustainable cities adopted by the Member States in 2007, theministers responsible for spatial policy have emphasized the importance of cities in theformulation of European policies. However, in a number of Member States approachestowards tackling industrial decline, decay of infrastructures and the housing stock oftenremain local and regional, whereas a national approach is missing. This is echoed inCohesion policy programmes, which often do not take up the options offered by theregulatory framework to develop strategies and implementation mechanism for urbanareas. At present, urban authorities in general have little overview on the allocation ofprojected funded by ERDF and ESF, let alone that they are able to pursue a strategicapproach using European funds.

Empirical research has shown that some regions are better able than others to triggerchange in economic structures, institutions and knowledge basis. It appears that thediversity in these structures is a key asset and strategies that build on competencesavailable in the regions seem to be more successful than those that are disconnected fromprevious industries, structures and knowledge assets.

A closer look at urban areas like Manchester, Essen, Lille and Bilbao shows the long-termtasks that are related to reconversion of land, housing estates, industry and the servicesector, environment and people skills, soft qualifications and attitudes. It takes severaldecades and large volumes of funds. Each of these cities had to master similar challenges.Key assets for future development were the reclamation of derelict sites, creation ofmodern transport connections, rehabilitation of the housing stock, refurbishment of publicspaces and environmental upgrading of rivers and open spaces. This paved the way for newindustries, services and cultural activities to locate in the previously distressed areas. Eachof the four cities had specific projects that were symbols for change and positive futurescenarios. A further common feature was the need for cooperation with neighbouring local

authorities. In Essen this took the form of Regionalverband Ruhr (Regional AssociationRuhr), one of the oldest planning associations in Europe, where local authorities (towns andcities in the Ruhr Area) delegated planning powers to an association they have established.More recently, a regional assembly composed of the participating institutions became thedecision-making body. Lille took a cross-border approach to development, where the lateststep was the establishment of the EGTC (European Grouping for Territorial Cooperation)Euromtropole Lille-Kortrijk-Tournai. The EGTC seeks to further deepen the work along acommon development vision, corresponding action plans and pilot projects.

The strategies chosen differed in some respects, and are shaped by local approaches, butalso by the national background of industrial policy and regional policy. Manchester focused

on knowledge-based industries and large developments schemes. ERDF had not onlycontributed financially, but also strengthened the local and regional level. Essen chose a

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specific role as centre of culture, creativity and services flagged by a number of projectsand initiatives like the Zeche Zollverein, that offers business zones for SMEs involved indesign and art and the Scheidtsche Hallen, where a former textile mill now offers mixeduse areas for creative industries, exhibitions and housing. ERDF supported a number ofsuch flagship projects. Lille was strongly supported by national deconcentration efforts that

helped in establishing technology intensive clusters with growth industries supported byERDF. Bilbao had to overcome the legacy of shipbuilding and mining areas. Regenerationwas mainly assigned to public-private partnerships. The Guggenheim Museum paved theway for a new image. Here ERDF support for regeneration was substantial.

In drawing conclusions and recommendations, a key lesson is that any industrial strategythat relies on a diversified economy with a favourable business environment and wellperforming services has a good chance to equip regions with a sound structure. Anyblueprints of industrial development need to be avoided: if in many cases areas succeededin attracting cultural and creative industries, the market gets settled at some stage and thisoption might not be successful in the next case. The same holds true for many of thenational or European champions: Pharmaceutical industry, electronics, biotechnology arenot the industries each region needs for sustained growth. Those concepts that haveproven to be most successful are those, where regions draw upon their own pastexperiences, capacities and capabilities, and out of which grow new businesses andventures.

Nevertheless, the scale of investment needed to tackle the problems of derelict land,housing and infrastructure over several decades, puts regions with an industrial heritage ina weaker position when competing for public funds to support research, technologicaldevelopment, innovation and modern skills. Since the Cohesion policy has more and moreturned into a policy for RTDI related investments, and regional success stories can be toldfrom these investments, old industrial regions may have fallen short of attention and publicawareness. Since the 1980s old industrialised regions have been out radar range as far asthe analytical as well as the political level are concerned. Still, they have not disappeared,neither in the industrial countries of EU-15 nor in the new Member States and continue topresent major challenges.

Thus this briefing note suggests that the European Commission redirects its attention fromresearch in the long-term development of these regions and returns to a more tailor-madeguidance on how to use funds for helping them in a practical way. Blueprint strategiesrelating to smart and sustainable growth amount to general guidelines. However, massivetangible experience has been gathered in all aspects of reconversion issues - legal,technological, economic and ecological - and it is extremely valuable but neglected.

The European Parliament should emphasize the need to involve cities and urban areas inthe decision making process of programme elaboration and implementation. A territorialstrategy with allocation mechanism for the selection of projects and appropriate monitoringand evaluation tools should be the minimum requirement. Structural and Cohesion fundsoffer a wide range of funding opportunities that can be integrated in operationalprogrammes. However, urban authorities are often not involved in setting up andimplementing programmes or parts of such programmes, but rather participate at anindividual project level.

Member States should ensure that old industrial regions are not left behind in the

competition for scarce state funds. Member States and regional and local authorities couldtake advantage of the new instrument Integrated Territorial Investment offered in the

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draft regulation for the new funding period 2014 2020 which will support sustainableurban development. An Integrated Territorial Investment may be established for adesignated area (e.g. a functional region or a sub-urban region), suggest a package ofactions (from various European funds, which need to be complemented by national/regionalco-financing) and provide a governance arrangement. Member States and regional and

local authorities are asked to take a positive view on the development opportunitiesembodied in such an Integrated Territorial Investment and to encourage old industrialisedareas to engage at this level. Of course this might require some changes in the operationsof programmes as territorial allocation mechanism must be put in place. Local and regionalauthorities are asked to draw up local action plans to establish their territorial strategy.This should be focused on a specific problem or issue (rather than urban development ingeneral), cover the relevant territory (not just the distressed areas, but also prosperousones to link with), allocate a time plan, budgets and responsibilities, and establish amonitoring and evaluation framework as well as an exchange and learning platform. SuchIntegrated Territorial Investments could bring a new territorial approach towards integrateddevelopment of old industrial areas and help these regions to start off in the thirdindustrial revolution.

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1. ECONOMIC, SOCIAL AND ECOLOGICAL CHALLENGESOF STRUCTURAL TRANSFORMATION

KEY FINDINGS

Industrial policy results from the interplay of several policies that are either targetedat industries or at macroeconomic competitiveness in general. Current policyapproaches foster the improvement of common standards and other frameworkconditions, as well as horizontal measures directed at improving RTDI,infrastructures, skills, entrepreneurship.

As a response to the sharp downturn of the manufacturing industry in Europe duringthe crisis and the slow recovery, the emphasis on industrial policy has recentlygained momentum. The Flagship initiative on Industrial policy sets out initiatives at

horizontal level to boost innovation and improve competitiveness and takes acomprehensive view on the entire value chain, from raw materials to after-saleservice.

Cohesion policy is assisting regions in implementing smart specialisation strategiesand strengthening local clusters. Modernising the skill base is essential for thesuccess of such strategies.

Although industrial policy may not be targeted at regions, its impact materialises inspecific types of regions with a high industrial base.

Industrial areas notably those undergoing extensive sectoral restructuring (e.g.old coal, steel, shipbuilding or textile areas) face major challenges that affectbusiness development but also the broader social and environmental context. Withthe Eastern enlargement of the EU and the massive increase in regional disparities,the focus of Cohesion policy has shifted from this type of region.

New theoretical approaches highlight the importance of transformation processes inregional systems. Changes that establish links to existing elements of the innovationsystem (such as research and training organisations, enterprises, skill levels,network relations) are more likely to succeed than those which are unrelated.

With the Leipzig Charter Member States have committed themselves to supportintegrated urban development concepts, which put a stronger focus on theintegration of sectoral policies with urban development issues.

Cohesion policy with its emphasis on smart specialisation and some support forurban dimension offers a large toolkit. However, with the emphasis on RDTI, areaswith an old industrial base might not always be well positioned to succeed inattracting sufficient funds for conversion.

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1.1. The significance of industry

Manufacturing has historically been the driver of growth and structural change. Within thepast 10 to 15 years the European industry has increased productivity substantially, shownstrong innovation, improvements in environmental performance, accomplished aconsiderable re-orientation of its workforce and capital investment, and developed newproducts and new markets1. Value chains that combine products and services have becomeincreasingly complex. Production methods are oriented towards mass customisation andcloseness to the markets, and have changed the overall environment for industries.

Although declining, the importance of manufacturing is still high. Currently industryaccounts for about 16% of the European Union (EU) gross domestic product (GDP)2. Agrowing share of the service sector is closely related to the manufacturing industries, eitherthrough inputs into the production process or through the equipment and hardware theyuse such as transport, information and communication3. The European Commission (EC)estimates that for every 100 jobs created in industry 60 to 200 new jobs come intoexistence in the rest of the economy, depending on the industrial sector4.

The financial and economic crisis has hit the manufacturing sector dramatically. Industrialproduction fell almost uninterrupted for 14 months, before reaching a low point in April2009, some 20.7 % below its (seasonally adjusted) pre-downturn peak. A total of 3 millionindustrial jobs have been lost since the outset of the crisis with industrial production 10%lower than pre-crisis and consumer and business confidence at a low level. A DG Enterprisereport states, that it might take more than four years to reach the pre-crisis level 5.

Crisis and recovery affected industries in a very uneven way. Capital goods, durable andintermediate goods were hit harder than non-durable consumer goods. Reduction in output

was significantly higher in industry than in services. In 2011 production levels for consumergoods were close to pre-crisis levels, while the hardest hit goods were still well below.Especially the automotive industry, basic metals and machinery experienced larger declinesin production than other manufacturing industries6

With the persistence of the financial problems, the EC states that Europe needs its realeconomy more than ever to underpin the recovery of economic growth and jobs. Our

industry is well placed to assume this role: Europe is the world-leader in many strategic

sectors such as automotive, aeronautics, engineering, space, chemicals and

pharmaceuticals. Industry still accounts for 4/5 of Europes exports and 80% of the private

R&D investment comes from manufacturing7

1 European Commission (2010a), EU Manufacturing Industry: What are the Challenges and Opportunities for theComing Years? First tentative findings of a sector-specific analysis carried out in DG Enterprise and Industry,Second High-level Conference on Industrial Competitiveness. 26th April 2010, Brussels, p. 2.

2 http://ec.europa.eu/enterprise/initiatives/mission-growth/index_en.htm.3 European Commission (2012b), Industrial Performance Scoreboard and Member States' Competitiveness

Performance and Policies, SWD(2012) 298. Commission staff working document, p. 45.4 European Commission (2012a),A Stronger European Industry for Growth and Economic Recovery. Industrial

Policy Communication Update. Communication from the Commission to the European Parliament, the Council,the Economic and Social Committee and the Committee of the Regions, 10.10.2012, COM (2012) 582 final,Brussels, p. 2.

5 European Commission (2011a), EU Industrial Structure 2011. Trends and Performance. Directorate-General forEnterprise and Industry. Brussels, p. 2.

6 European Commission (2011a), p. 2.7 European Commission (2012a), p. 3.

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Against the background of these challenges the EC launched the Flagship Initiative (FI) on

Industrial Policy: Reinforcing competitiveness8 in 2010, as part of the Europe 2020Strategy. The initiative picks up on the importance of a strong, competitive and diversifiedindustrial manufacturing value chain for the EUs competitiveness and job-creation potentialand sets out a framework for a new integrated industrial policy. In order to support the

transition to a more sustainable, inclusive and resource-efficient economy, industrial policywill focus on both horizontal and sectoral policies at all levels.

The basis of the FI is a wide understanding of industrial policy, putting competitiveness andsustainability of European industries centre place. Considering the impact of other policies like transport, energy, environment, social and consumer protection and single market - oncompetitiveness, and pushing innovation policies forward for achieving a quantum leap, areamong the 10 key actions suggested. Other actions concern support to small and medium-sized enterprises (SME) in accessing finance, upgrading of infrastructures and a focus onthe entire value chain from raw materials to after-sale services.

Specific reference is made to Cohesion policy and the Research Framework Programme toassist regions to adopt 'smart specialisation strategies' to strengthen their competitivenessthrough developing innovation niches.....Through local clusters that are connected Europe-

wide, a critical mass can be achieved for R&D and innovation, skills, funding, the cross

fertilisation of ideas and entrepreneurial initiatives9. Modernising the skill base, which isclosely related to the industrial policy FI, is the main aim of the FI An Agenda for newskills and jobs. Shortage and mismatch of specific skills and qualifications is still one of theproblems European industries and industrial regions are struggling with, and calls forstrengthening of the European Social Fund (ESF) to support qualification and matching.

The most recent communication of the EC on A stronger European Industry for Growth andEconomic Recovery Industrial Policy Update emphasises the need for a European visionto lay the foundation for a Third Industrial Revolution. A shift towards renewable energy;conversion of buildings and production into an energy efficient mode with renewableenergies on-site and using internet technology to transform power grids into smart gridswill require a reconfiguration of the entire economic infrastructure and will create new jobs,goods and services. Again, the Structural Funds will need to focus on the advancement ofinfrastructures necessary to boost this energy shift.10

1.2. Definitions and concepts

The emergence of a keen interest in industrial policy calls for a closer look at the

terminology. The term industry is far from being clearly defined it may refer to themanufacturing sector, or to the entire productive sector including also energy production,mining and services or denote simply a specific sector (like automotive industry) 11.

8 European Commission (2011a), Industrial Policy: Reinforcing competitiveness. Communication from theCommission to the European Parliament, the Council, the European Economic and Social Committee and theCommittee of the Regions, COM(2011) 642 final, {SEC(2011) 1187 final}{SEC(2011) 1188 final}, Brussels,14.10.2011.

9 European Commission (2011a), p. 14.10 European Commission (2012a), Executive summary.11 Also the term industry is ambiguous: Industry is the production of an economic good or service within an

economy (http://en.wikipedia.org/wiki/Industry). A single industry is often named after its principalproduct,for example, the auto industry. In a narrow sense it might focus on the manufacturing sector (as widelyapplied in Europe). or it could be used as synonym for sector and includes also producer related services,finance, transport, which would conform to the US definition of industries. For statistical purposes, industriesare categorised according NACE, which is the European standard classification of productive economicactivities. So for the industrial production index (published monthly by EUROSTAT) industry includes B to E of

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http://en.wikipedia.org/wiki/Production_(economics)http://en.wikipedia.org/wiki/Economic_goodhttp://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/Economyhttp://en.wikipedia.org/wiki/Industryhttp://www.businessdictionary.com/definition/principal.htmlhttp://www.businessdictionary.com/definition/product.htmlhttp://en.wikipedia.org/wiki/Industryhttp://www.businessdictionary.com/definition/product.htmlhttp://www.businessdictionary.com/definition/principal.htmlhttp://en.wikipedia.org/wiki/Economyhttp://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/Economic_goodhttp://en.wikipedia.org/wiki/Production_(economics)


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The ambiguity in the definition of industry is to some extent echoed in the termindustrial policy. As part of structural policy, industrial policy includes those decisions andmeasures that directly or indirectly aim at changing industrial structures12 (see also Figure1:). These may be classified into policies that indirectly target industry (likemacroeconomic, re-distributional, wage, tax policies, agriculture and fisheries etc) and

policies for industries. The latter can be differentiated into another two groups: Nonindustrial policy measures directly affecting industry (like regional development, buynational campaigns, price controls, specific environmental policies, etc) and policies thatcan be subsumed as a wider concept of industrial policy. Such a wider concept includes firstof all framework aspects, which follow directly the core competencies of the EU and includeinternal market measures and Cohesion Policy. Horizontal industrial policies constitute thenew focus of European industrial policy. These include R&D strategies, entrepreneurship,skills and human capital, public procurement, etc.

Figure 1: Overview of industrial policy approaches

Policiesaffectingindustry

Policiesnotdirectedatindustry:

infrastructure,energy,agricultural/fisheries,(landuse)

PoliciesforIndustry

Non industrialpolicymeasuresdirectlyaffecting

industry

regionalplanning/development, specificenvironmental policies)

Widerconceptofindustrialpolicy

FrameworkaspectsCohesionpolicy,better

regulation,stateownershipSource : Pelkmans (2006)

13.

Sectoral interventions and specific industrial policy (technology policy, defence, trade etc)have formed the origin of the EU, which began in 1952 with free trade and interventions inthe form of the European Coal and Steel Community (ECSC). Throughout the Europeanintegration process a range of sectors were subject to specific regulations or exemptionsfrom regulations (e.g. textile, shipbuilding, cars). However, 50 years after the ECSC such

Horizontalindustrialpolicyresearch,andinnovationentrepreneurship,skills,

restructuring, publicprocurement

Sectoral/specificindustrialpolicyCluster

policy,technologypolicy

NACE (B-mining and quarrying, C-manufacturing, D-electricity, gas, steam and air conditioning supply, E-watersupply, sewerage, waste management and remediation activities). Construction, wholesale and retail andservices are not included in this indicator. However, in the analytical parts of EURSTAT publicationsmanufacturing and construction are often subsumed into industry. Thus, it should be noted that there isconsiderable diversity in the definition of industry and for good or for bad no uniform approach has yetbeen established.

12 Hochfeld Ch. Et al (2012), Sustainable Industrial Policy for Europe: Governing the Green Industrial Revolution.Memorandum on guiding principles and perspectives for the green transformation of the European industry. Amemorandum by the ko-Institut e.V. Green New Deal Series volume 3, p. 10.

13 Pelkmans J (2006), European Industrial Policy. Bruges European Economic Policy Briefings (BEEP) briefing n15, July 2006, p. 4.

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specific industrial policies have become very limited and are mainly applied as crisismanagement measures.

Nowadays subsidies, tax incentives, restructuring programmes, public procurement, clusterpolicies and research and innovation are the main instruments used in industrial policy. Of

these, the cluster policies can be regarded as a modern form of sectoral intervention.Moreover, the understanding of industrial policy has changed over time. Starting from anapproach targeted at large enterprises and sectors the focus has moved to horizontalpolicies changing the business environment and fostering SMEs.

Many of the current problems in industries are rooted in the past. In the 1950s, 1960s and1970s the UK and FR governments attempted to create national champions (especially incomputers and aerospace) essential for the growth of national economies and aiming atclosing the technology gap between Europe and the US, whereas DE fostered research andtechnology and a strong medium-sized and technology based SME sector (Mittelstand)14.Lessons from the industrial policy in the 1960s and 1970s were that governments hadoverrated the risks and costs of market failures and underestimated the risks of failure ingovernment interventions. Most of the interventions were directed at preservation ofdeclining industries (coal, steel, textiles) while the future oriented development could notbe captured by policy measures.

Sectoral policies laid the foundation of European Integration with ECSC and the EuropeanAtomic Energy Community (EURATOM), both predecessors of the European Community.Steel was one of the troubled industries and governments were looking for Europe-widesolutions for the so-called sun-set industries, while the industrial nations tried to keepcontrol over the sun-rise industries.

From the 1980s onwards there was a shift towards horizontal, non-selective policies aimingat improving the business environment and fostering new technologies. More emphasis wasplaced on competition, especially with the internal market. Since the Maastricht Treatyindustrial policy is part of the EU legislation. Article 173 of the TFEU (Treaty of theFunctioning of the European Union) states that "the EU and the Member States shall ensurethe conditions necessary for the competiveness of the Union's industry exist"15. The singlemarket improved the framework for European industries. With Europe 2020 and the crisisindustrial policy returned back to the European agenda.

1.3. Reconversion and restructuring in old industrial regions

1.3.1. Challenges for industrial regionsIndustrial policy does not follow a territorial approach. However, industry has been spatiallyconcentrated and thus regions are differently affected by major trends in industrialdevelopment. With the changes in the international division of labour in the 1970s, the oilcrisis and subsequent blow to manufacturing in Europe, industrial regions in Europe (in EU

14 Owen G (2012), Industrial Policy in Europe since the Second World War: What has been learnt? ECIPEOccasional Paper No 1/2012, p. 10f.

15 This article further defines the scope of EU industrial policy as "1) Speeding up the adjustment of industry tostructural changes, 2) Encouraging an environment favourable to initiative and to the development ofundertakings throughout the Union, particularly small and medium-sized undertakings, 3) Encouraging anenvironment favourable to cooperation between undertakings, 4) Fostering better exploitation of the industrialpotential of policies of innovation, research and technological development". Industrial policy is well integratedinto a number of other EU policies including trade, single market, R&D, competition, social and employment,consumer protection and environment; in European Parliament (2012), General Principles of EU IndustrialPolicy. www.europarl.europa.eu, p. 1.

17
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15) relying on coal, steel, textiles or machinery were suddenly confronted with shrinkingbusinesses, unemployment and decline. A common feature of these regions was that theyhad enjoyed long periods of economic growth in the past16. The source of prosperity oftenwas the specialisation on products that were basic inputs to other sectors (steel, trains andrail infrastructure, chemical products, electronics), or mass consumption goods (textiles,

cars). The physical infrastructure as well as the qualification of the workforce wascompletely focused on these basic industries. When these industries faced Europe-widedecline, the crisis had severe impact on the entire region. Most of these regions werecentred on large cities outside the capital regions (Northern England with Manchester,Ruhr-Valley with Essen, Dortmund, Bochum, etc, Basque Country with Bilbao, NorthernFrance with Lille etc). Within a decade many of these urban areas lost a substantial numberof their jobs in textiles, steel making, coal mining and shipbuilding. The largest oldindustrialised regions (OIR) can be found in the UK, France, Germany and Spain.

With the Eastern Enlargement of the EU, similar, if not much more pronounced problems ofeconomic decline appeared in the industrialised regions in Eastern Germany, PL, CZ andSK. Decades of central planning left regions with even larger problems of dependence onbasic industries, rapidly rising unemployment, severe environmental problems and aderelict infrastructure.

Traditional industries have left a heritage of large firm dominance and a narrow economicbase, which makes the region vulnerable to economic shocks. A weak tradition ofentrepreneurship and the orientation of the skills at the dominant industries cannot beovercome within a few years. Particularly where industries have contracted relativelyquickly and policy interventions were insufficient or inappropriate, high and long-termunemployment has developed, particularly among young people and older men, as well aslow wage levels and a lack of job security. This in general leads to broader social dislocationand wider social problems. Underinvestment and deterioration of the natural and builtenvironment enforce these problems. Thus, the main challenges for Regional policy liein:

Physical regeneration of land; regeneration of housing and social infrastructure; renewal of infrastructure, oriented to the needs of new industries; the adaptation of existing skills and the development of new forms of human capital

that are not focused on old industries;

building up of RTDI activities; changes in institutional networks and cultural factors, to allow the mobilisation of

local resources and their use to develop new industries, rather than maintaining alock-in17 to old industries.

These challenges help to explain why private investment in these areas may be insufficientas they are less profitable than in some other areas because of:

Physical infrastructure that is not adapted to the needs of new industries and/orextensive need for land reclamation;

lack of future-oriented skills and R&D capacities;16 Skokan K (2009), Regional Clusters and Transformation of Old Industrial Regions. 3rd Central European

Conference in Regional Science CERS, 2009, p. 770 ff.17 Lock-in refers to a situation in which the weight of existing assets, cultures and practices has prevented

successful regional adjustment.

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little forward-looking entrepreneurship; physical distance from / poor connectivity to future-oriented agglomerations; institutional and cultural factors that make it more difficult for forward looking firms

to operate profitably.

1.3.2. Theoretical approaches concerning the transformation of old industrialareas

Old industrialized regions have been at the core of theoretical and analytical literature inthe 1980s and 1990s. Since then the term old industrialised regions (OIR) has largelydisappeared from the scientific literature, partly as a result of the dominant themes andconcepts of knowledge economy, learning regions, and the new regionalism. Among thevast literature on regional innovation systems and knowledge based development, twopolicy concepts can be mentioned, that provide important contributions to understandadaptation and change processes in OIR18.

Approaches related to regional innovation systems (RIS) (also subsumed under thenew regionalism concepts), emphasise the role of key actors from science, business andpolicy and their interaction, as well as the role of institutions for innovation processes.

Transformation processes within RIS generally follow historic development paths19 andmay take the following forms:

Path renewal denotes the rejuvenation of existing clusters or industries and mayimply severe changes in products, processes and organisations, e.g. through theapplication of new technologies in existing industries. But it does not transform theRIS in a broader way.

Path formation in established industries is related to diversification into establishedindustries that are new for the region. This may be induced through inwardinvestment and leads to the development of new supply chains. New clusters mayemerge and provoke changes in the technology and knowledge base.

Path creation implies a more radical change towards new high-tech and knowledgeintensive industries and results in more substantial changes of the technology andknowledge base.

Such changes - driven by key actors from business, science or policy - may be planned andbased on knowledge and foresight but also occur spontaneously in response to crisissituations. The direction and the kind of change is shaped by the context (national

industrial policy, global competitiveness of industries etc) and by specific characteristics ofthe RIS. Thus even identical policy interventions may lead to very different results. Someauthors20 argue, that different national institutional conditions, for example between themore market-driven approach of the UK, and the more statist and corporatist frameworksin FR and DE, might lead to different patterns of regional adaptation.

Nevertheless, there are some commonalities. Transformation materialises in soft factors(routines, attitudes), RIS elements (research and training organisations, firms), knowledge

18 Tdtling F. and Trippl M. (2013), Transformation of regional innovation systems. From old legacies to newdevelopment paths. In: Cooke Ph (2013), pp. 297-317, pp. 312 ff.

19 Path dependency denotes how economic performance is shaped by the legacy of past decisions and events20 Birch K et al (2010), Old Industrial Regions in Europe: A Comparative Assessment of Economic Performance.

In Regional Studies, Volume 44, Issue 1, 2010, p. 45f.

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relations and networks within the region or beyond. Thus, policy actions need to enhancethe capacity for transformation and target the areas in a comprehensive way.Recent research has focused on the question of why some regions are more able thanothers to promote path renewal, formation or creation. In this context, a key concept refersto variety (diversity) in economic structures, institutions and knowledge basis,

the transformational capacity of a region being positively affected by variety. A furtherdistinction is the one between related and unrelated variety. Related variety (diversitythat builds upon competences available in the region) seems to be more beneficial to aregion, as it allows for complementarities to existing industries and knowledge base.Connections to knowledge sources outside the RIS are considered to be particularlyimportant to ensure variety and new innovation impulses. Unrelated variety (e.g.emergence of a new industry that is not related to the existing ones) might protect theregion against external shocks, but it seems less sustainable in the long term.

1.3.3. Regional policy approaches

During the 1970s and 1980s, OIR like the Ruhr area in DE, North-East FR, North-East

England and South Wales in the UK received substantial amounts of regional aid forindustrial conversion, retraining, attracting new investment, environmental renewal andurban regeneration21. In the 1980s, however, the UK effectively reduced regional spendingwhilst other European countries like DE and FR doubled it. Also, the approaches weredifferent between these countries: FR and DE strived to build on existing regional assetsand competences (related variety) promoting processes of diversification into relatedtechnologies and the technological upgrading of existing industries; while the UK favouredthe support of inward investment in order to transplant new technologies andorganisational practices into OIR.

In DE the Lnder governments were the main policy actors. In FR, the UK and ES the

process of devolution has given regional actors a more important role (regionaldevelopment agencies in England and devolved administrations in Wales and Scotland;elected regional councils in FR, autonomous regions in ES). Moreover, during the 1980s anew Regional policy model found favour, supporting endogenous development through skilldevelopment, focusing on RTDI and supporting SMEs. Subsidies to firms were cut back,also due to the EU state aid regime that increasingly reduced the possibilities forinvestment support to large enterprises in the more developed Member States.

Integrated policy approaches have been discussed since the 1980s. They introduce aterritorial dimension into sectoral policies. The view that space matters and theunderstanding that policies needed to be differentiated according to their territorial

contexts, was at the origin of the current territorial cohesion concept. The ministersresponsible for spatial planning of the Member States adopted the Leipzig Charter onsustainable European cities in 2007. This charter emphasizes the importance of cities in theformulation of future EU policies and calls for a better use of integrated urban developmentpolicies for creating and ensuring high quality public spaces, modernizing infrastructurenetworks, providing innovation and educational policies and supporting deprivedneighbourhood policies22. The Toledo Declaration reiterates the importance of integratedapproaches as one instrument for implementing the Europe 2020 strategy. Criteria forsuccess are partnerships between government, real estate and finance, as well as the localpopulation and other stakeholders. The declaration addresses the challenges of

21 Birch K et al (2010), pp. 35-53.22 Naylon I. et al (2007), Follow-up of the Territorial Agenda and the Leipzig Charter:Towards a European Action

Programme for spatial development and territorial cohesion. By IR-Managementdienste GmbH;Commissioned by the European Parliament. Brussels; pp. iii f.

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demographic change and social inclusion. Furthermore there is a need for openness inpolitical life, as well as the activation and participation of local residents23.

This note also shows that a growing number of EU Member States have adopted integratedapproaches. Still there are wide differences between Member States. Some Member States

have adopted comprehensive programmes for integrated urban development at nationallevel (BE, DK, DE,FI, FR, IE, IT, NE, SE, UK), while others have implemented smaller scaleapproaches at national or regional levels (AT, BG, CZ, CY, HU, LV, LI, MT, PL, PT, RO, SI,ES). For the first group the national level plays an important role in providing impulses andincentives, although financial resources are declining in face of financial rigour related tothe economic crisis (DK, DE, UK). The second group includes most of the new MemberStates, which are affected by industrial decline, disinvestment in infrastructure and thehousing stock, and social as well as environmental problems. In these Member Statesapproaches often remain at a regional and local level, and there is a lack of national policyapproaches and funds24.

Cohesion policy offers a wide array of measures related to urban and regional development.The main fields are support of economic development policies (with support ofinfrastructures, rehabilitation of land, education and training, RTDI and employmentgeneration) as well as business focused policies (business parks, vocational training,applied RTDI projects, support for entrepreneurship and clusters) and institutional capacitybuilding and partnerships. Since the launch of the Lisbon Strategy the emphasis has beenmore and more on RTDI related measures. From a simple benchmarking exercise, withexpenditure categories attributed to Lisbon objectives, the emphasis now lies on smartspecialisation: identifying the characteristics and assets of a specific type; highlighting thecomparative advantages; and inducing regional stakeholders and resources to collaborateon an excellence driven strategy for the future of the respective region. The urbandimension has received some attention in the current period, but still remains fragmentedand often quite vague.

23 Difu (2012), 5 years after the LEIPZIG CHARTER Integrated Urban Development as a Prerequisite for aSustainable City. By German Institute for Urban Affairs (Difu), commissioned and published by the FederalMinistry of Transport, Building and Urban Development. Berlin; p. 20f.

24 Difu (2012), p. 83f.

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2. POSSIBILITIES OF FUNDING IN INDUSTRIALAREAS UNDER STRUCTURAL FUNDS

KEY FINDINGS

Cohesion policy offers a comprehensive range of instruments to support theregeneration of industrial areas.

Support for industrial regeneration is provided through Cohesion policy, national andregional or urban economic development policies and is regulated by the EURegional Aid Guidelines.

Cohesion policy contributes to industrial conversion through support for businessinnovation and investment - similar to the smart specialisation strategies proposedfor 2014-20.

A second strand of support refers to social inclusion measures to tackle high levelsof unemployment and social dislocation. Such measures in turn enhance the localpotential for business development and innovation.

A further dimension constitutes the integration of different types of interventions,like the implementation of urban regeneration as horizontal theme for ESF andERDF, as practiced in Sachsen-Anhalt.

JESSICA supports urban development based upon an integrated plan for sustainableurban development. This new financial instrument is focused on public-private

partnerships and supports a wide range of measures contributing to reconversion ofurban areas.

Exchange of experience in urban development is provided through the URBACTprogramme. A main focus here is on urban regeneration issues and the link betweenplanning and reconversion. Major issues identified are the need to involve more thanone municipality in rehabilitation of sites, infrastructure and environment and focuson social issues to rehabilitate the image.

2.1. Cohesion policy and industrial reconversion policy

Cohesion policy funds a range of interventions in support of industrial regeneration (see 0).The European Social Fund (ESF) was set up in 1957 to improve workers employmentopportunities25 and now funds labour market interventions, entrepreneurship and socialinclusion. The European Regional Development Fund (ERDF) was established in 1975 withthe aim of correcting major regional imbalances,26 including those due to industrial changeand structural underemployment, and today co-finances business support, infrastructureand RTDI. The Cohesion Fund (CF) was created in 1993 and co-finances major transportand environmental infrastructure in the Convergence Countries.

25 The High Contracting Parties of Belgium, Germany, France, Italy, Luxembourg and the Netherlands (1957),The Treaty of Rome, 25 March 1957, Rome, Articles 3 and 123-128.

26 European Council (1975) Regulation (EEC) N 724/75 of 18 March 1975 establishing a European RegionalDevelopment Fund, Brussels, Articles 1 and 4.

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Table 1: Cohesion policy support for industrial reconversion by Fund in 2007-13

CF

X

ERDF ESF

Transport and environmental (inc. energy) infrastructure X

Information society interventions (inc. infrastructure) X

Land reclamation and brownfield redevelopment X

Support for the creation/growth of businesses, esp. SMEs,inc. funding, services and cluster support

X X

R&D and innovation infrastructure and projects X

Education and training infrastructure and services X X

Access to employment X

Social inclusion of disadvantaged people X

Local development initiatives X

Strengthening institutional capacity X

Other e.g. tourism, culture, health & social infrastructure X

Source: EPRC based on : European Parliament and Council (2006) Regulation (EC) No 1080/2006 of 5 July 2006on the European Regional Development Fund and repealing Regulation (EC) No 1783/1999, OJ L 210, 31.7.2006,Articles 3-5; European Parliament and Council (2006) Regulation (EC) No 1081/2006 of 5 July 2006 on theEuropean Social Fund and repealing Regulation (EC) No 1784/1999, OJ L 210, 31.7.2006, Article 3; EuropeanCouncil (2006) Regulation (EC) No 1084/2006 of 11 July 2006 establishing a Cohesion Fund and repealingRegulation (EC) No 1164/94, OJ L210, 31.7.2006, Article 2.

Moreover, since the Structural Funds reform of 1988, Member States have been requiredto develop and implement programmes on the basis of partnership-based strategies thatbring together regional actors and resources to develop economic development solutions.

This bottom-up approach is argued to be fundamental to the mobilisation of capacities forsocio-economic development,27 and has been extended to the local level, via integrated,bottom-up urban and rural (LEADER) development strategies. Proposals for 2014-20require thematic bottom-up strategies, notably for smart specialisation, and poverty.

The thematic allocation of the Cohesion policy budget varies across Member States (seeAnnex). There are clear differences between Member States, with a higher percentage offunds being allocated to infrastructure in the Convergence Countries, whereas funding inricher Member States is typically focused on RTDI and Entrepreneurship or on Humancapital and other labour market measures. The main reason for this difference is that onethird of funding in the Convergence Countries is channelled through the Cohesion Fund,

which only finances major transport and environmental infrastructure networks.

Cohesion policy funding for industrial regeneration is implemented alongside other EU andMember State economic development policies, not least the EU Regional Aid Guidelineswhich regulate funding for state aid in structurally weaker regions28. In addition, otherelements of the EU budget also co-finance economic development projects, notably theFramework Programme and the Competitiveness and Innovation Programme,29 and the

27 Barca F. (2009) An agenda for a reformed Cohesion policy : A place-based approach to meeting EuropeanUnion challenges and expectations, Independent Report for Danuta Hbner, Commissioner for Regional Policy,Brussels.

28 European Commission (2006), Guidelines on national regional aid for 2007-2013, OJ C54/13, 4 March 2006.29 European Parliament and Council (2006), Decision No 1982/2006/EC of 18 December 2006 concerning the

Seventh Framework Programme of the European Community for research, technological development anddemonstration activities (2007-2013), Brussels.

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European Globalisation Adjustment Fund (EGF) which provides short-term support to helpworkers who have lost their jobs due to the financial crisis or globalisation pressures. 30

2.2. Examples of the use of Cohesion policy for industrial areas

Cohesion policy support for industrial reconversion tends to be concentrated on urban areasbecause in practice the main areas with extensive needs for this type of public investmentare relatively large urban areas, particularly second tier cities outside the mainmetropolitan centres (which instead tend to be characterised by more advanced servicesectors). Urban areas are often sites of industrial restructuring because most businesseslocate in major population centres in order to serve markets, link to suppliers and draw onlabour and knowledge sources. Cohesion policy funds a range of different approaches toindustrial reconversion in urban areas in 2007-13.

First, Cohesion policy support for industrial reconversion in many regions emphasisessupport for business innovation and investment (similar to the smart specialisation

strategies proposed for 2014-20). This approach is seen, for example in the sub-region ofKeski-Suomi and its main city of Jyvskyl (in the NUTS 2 region of western Finland), whichhas experienced the restructuring of major industries (notably the IT sector, specificallyNokia) and relatively high unemployment rates in recent years. A comprehensive approachto innovation support is seen as critically important for the regions future economicdevelopment.31 This strategic approach is facilitated by the regions existing strengths,notably innovative businesses and dense regional innovation institutions (including anumber of universities and intermediary bodies). Key challenges include shortages ofskilled labour, weak public investment in R&D, dependence on a few large industrialcompanies and limited population of innovative SMEs. In response, the ERDF/ESF cofinanced regional strategy in 2007-13 has focused on supporting the key clusters of

mechanical engineering, bio-energy and housing, through investment in R&D, innovation,education and training and business development.32

A second strand of Cohesion policy support for industrial regeneration in 2007-13 concernssocial inclusion. Many old industrial areas are characterised by high levels of unemploymentand social dislocation, which in turn limits local potential for business development andinnovation. The ERDF OP in Lowlands & Uplands Scotland (UK), for example, supportsentrepreneurship and physical regeneration in disadvantaged urban areas, alongside theregions ESF OPs funding for vocational training, advice for job-seekers, assistance withchildcare, and initiatives to encourage employers to understand the needs of vulnerablegroups entering the workforce.33 Both EDF and ESF funding is implemented by Community

Planning Partnerships (CPP), which are led by local authorities and involve a range of publicentities. The CPP have a broad remit to ensure that local people are engaged in decisionson local public services, and to facilitate cooperation between organisations in public service

30 European Parliament and Council (2006) Regulation (EC) No 1927/2006 of 20 December 2006 on establishingthe European Globalisation Adjustment Fund, Brussels.

31 Lnsi-Suomi Region (2007), Alueellinen Kilpailukyky-ja Tyllisyystavoite Lnsi-Suomen EAKR-Toimenpideohjelma 2007-2013, Tampere, 30.7.2007.

32 Charles D., Gross F. and Bachtler J. (2012) Smart specialisation and Cohesion policy a strategy for allregions? IQ-Net Thematic Paper No. 30(2), European Policies Research Centre, University of Strathclyde,Glasgow, p. 21.

33 Scottish Government (2008) Lowlands & Uplands Scotland ERDF and ESF 2007-2013 Operational Programmes,Edinburgh.

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provision.34 This approach is seen to have led to a more strategic use of resources, and tohave stimulated more effective local cooperation and service delivery.

A third dimension of Cohesion policy funding for industrial regeneration involves theintegration of different types of intervention. In Sachsen-Anhalt (Germany), for example,

the urban dimension is a horizontal theme for the ERDF and ESF OPs. The Lands maincities are seen as particularly important locations of economic activity because they are thesite of high-value infrastructure that serves the wider region and because their knowledgeinstitutions facilitate the development of a knowledge-based economy.35 The OPs fundintegrated approaches to urban development that address a range of themes (RTDI,education, physical regeneration, land reclamation, as well as economic, urban transport,water and waste infrastructure) and involve various actors (e.g. firms, universities, localauthorities, Land). Support for the knowledge-based economy is seen to be most effectivein the two main cities (Magdeburg and Halle), whereas a broader approach (under theumbrella of the domestic IBA36 Urban Redevelopment strategy)37 - focusing long-terminvestment in a range of interventions and drawing on extensive citizen participation andhigh visibility - is important in other cities.38 A key challenge for urban development inSachsen-Anhalt concerns the fiscal constraints facing local authorities and the need for ongoing Land, federal and EU funding in order to implement major projects.

Cohesion policy regulations have not required the direct participation of city authorities inmanaging programmes. Nevertheless, local authorities (or associations of such authorities)are usually represented on programme monitoring committees, are consulted onprogramme strategies and are often recipients of programme funding. Although EUauthorities have for some time encouraged the involvement of city authorities in Cohesionpolicy programming, the degree of participation depends in part on the Member Statesdomestic decisions and institutional frameworks (e.g. relating to the division of tasksbetween national, regional and local authorities, as well as broader approaches topartnership).

The evaluation of the urban dimension has also shown that, at present, urban authoritiesin general have little overview on the allocation of projected funded by ERDF and ESF, letalone that they are able to pursue a strategic approach using European funds. The usualprocedure is that a department of the city administration submits a project proposal to therespective department in the sectoral ministry. Decisions within various ministries are oftentaken without much coordination related to the territorial incidence of the projects. Thusonly the evaluation shed some light on the actual urban dimension of the Cohesion Fundsprogrammes. Major stakeholders in five cities participated in a process of developingobjectives, indicators and assessing results and impacts of European Funds for their

respective territory. Although the participation and role of city authorities in Cohesion policyis conditioned by Member States own institutional frameworks and political decisions, theremay be scope for EU authorities to facilitate a more active approach by providing forums

34 Blake Stevenson (2011), European Structural Funds programmes in Scotland (2007-2013): evaluation of thecontribution of European Structural Funds to Community Planning Partnerships, Report to the ScottishGovernment, Edinburgh, pp. 2-3.

35 Land Sachsen-Anhalt (2007), Operationelles Programm EFRE Sachsen-Anhalt 20072013, Magdeburg, pp. 7679.

36 Internationale Bauaustellung (International Building Exhibition).37 Land Sachsen-Anhalts Ministry of Regional Development and Transport (2010) Less is Future : 19 Cities 19

Themes, Catalogue for the final presentation of the International Building Exhibition Urban RedevelopmentSachsen-Anhalt, Magdeburg.

38 Rambll and Metis (2010) Evaluation der stdtischen Dimension, Revised second interim report, Magdeburg,October 2010, pp. 46-47.

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for the exchange of best practice and lesson-learning, not only involving city authorities butalso the relevant authorities at Member State and regional levels.

A fourth approach aims to mobilise private sector funding and expertise for integratedurban regeneration strategies. JESSICA is a financial instrument which allows ERDF funding

to be allocated to Urban Development Funds (UDFs) which in turn provide equity, loansand/or guarantees to public-private partnerships or other projects in the context of anintegrated plan for sustainable urban development. Projects can include urbaninfrastructure; cultural sites; redevelopment of brownfield sites; new facilities for SMEs, ITand R&D; university buildings; and energy efficiency.39 By the end of 2011, 30 UDFs wereoperational, with the first investments in projects being made in Estonia, Brandenburg(Germany), Poland and Lithuania.40 Instruments such as JESSICA can allow funds to berecycled for future use; facilitate the leveraging of other public and private funds; andmobilise private sector expertise for project selection and management.41 However, theyare also complex to administer; can involve tensions between public sector goals andprivate sector profit orientation; and may see difficulties with state aid compliance.42

A final key approach to Cohesion policy support for urban development in 2007-13 focuseson the exchange of experience, via the URBACT II programme, which builds on the earlierURBAN Community Initiative and is funded under the European Territorial CooperationProgramme.43 It has a budget of c. EUR 68 million (including c. EUR 53 million from theERDF) and funds the development of integrated Local Action Plans covering physicalregeneration, economic and social development and environmental sustainability. Projectfunding (of EUR 150,000 - EUR 710,000) covers the preparation of the plans (e.g. the costsof meetings, communication and technical assistance) but their implementation is fundedby Member States, local partners or mainstream ERDF/ESF OPs.44 Projects are funded innine themes: innovation and creativity; active inclusion (e.g. demographic change, socialintegration); urban renewal (physical regeneration); low carbon urban environments(transport, housing, food systems); disadvantaged neighbourhoods; human capital andentrepreneurship; quality sustainable living; metropolitan governance; and port cities.45.One of the projects deals with Driving Forces of Urban Cohesion, where several urbanareas exchange experiences on recovering of abandoned and obsolete industrial areas. Oneof the main conclusions in this project is that the major planning issues (reorganisation ofinfrastructures, location and finance of large projects, improvement of environment andphysical space, rehabilitation of derelict land etc) are clearly inadequate to be taken overby a single municipality. A second conclusion is that the social dimension of decline in suchcities and towns are one of the major issues to be tackled by public policy, which isimportant for gaining a future oriented profile again46.

39 Kreuz C. (2010), Jessica UDF typologies and governance structures in the context of Jessica implementation,Report to the EIB and European Commission.

40 Zaliwska D. (2011), JESSICA state of play, Presentation to the 3rd Annual JEREMIE and JESSICA Conference,Warsaw, 27-28 October 2011.

41 Michie R. and Wishlade F. (2012) Between Scylla and Charybdis : navigating financial engineering instrumentsthrough Structural Funds and State aid requirements, IQ-Net Thematic Paper No. 29(2), European PoliciesResearch Centre, University of Strathclyde, Glasgow, p. 3.

42 Michie R. and Wishlade F. (2012) op. cit., pp. 60-74.43 DG Regional Policy (2007) Operational Programme 'URBACT II', Brussels, available at:

http://ec.europa.eu/regional_policy/country/prordn/details_new.cfm?gv_PAY=EU&gv_reg=ALL&gv_PGM=1265&LAN=7&gv_per=2&gv_defL=7, accessed 4 January 2012, p. 1.

44 http://urbact.eu/, accessed 4 January 2012.45 Managing Authority of the URBACT Programme (2011) URBACT project results, Paris.46 http://urbact.eu, accessed 4 January 2012.

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http://ec.europa.eu/regional_policy/country/prordn/details_new.cfm?gv_PAY=EU&gv_reg=ALL&gv_PGM=1265&LAN=7&gv_per=2&gv_defL=7http://ec.europa.eu/regional_policy/country/prordn/details_new.cfm?gv_PAY=EU&gv_reg=ALL&gv_PGM=1265&LAN=7&gv_per=2&gv_defL=7http://urbact.eu/http://urbact.eu/http://urbact.eu/http://urbact.eu/http://ec.europa.eu/regional_policy/country/prordn/details_new.cfm?gv_PAY=EU&gv_reg=ALL&gv_PGM=1265&LAN=7&gv_per=2&gv_defL=7http://ec.europa.eu/regional_policy/country/prordn/details_new.cfm?gv_PAY=EU&gv_reg=ALL&gv_PGM=1265&LAN=7&gv_per=2&gv_defL=7


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3. ILLUSTRATIVE EXAMPLES HOW CITIES HAVE USEDSTRUCTURAL FUNDING TO TACKLE STRUCTURALCHANGE IN INDUSTRIAL AREAS

KEY FINDINGS

Cities with an old industrial legacy like Manchester, Essen, Lille and Bilbao facesimilar development problems like many other cities, such as the challenge todevelop a modern transport system and the need for renewal and rehabilitation ofthe old housing stock, in addition to the massive changes in economic activities and

jobs. But each of the cities also had its specific development strategy.

The strategy for Manchester defined growth through knowledge-based industriesbased on attractive sites as the overarching goal. Large-scale schemes developed

East Manchester, the main industrial zone of the past, to a neighbourhood withmixed uses, upgraded the city centre, and expanded the airport and itssurroundings. ERDF had a significant added value strengthening the regional leveland enabling the urban area to support integrated strategies.

Essen is one of several cities in the Ruhr Area. Its reconversion strategy led to thedevelopment of business zones on brownfield sites for business-related services,and the cultural and creative sectors, with several flagship projects signalling thetransformation of the image of the area. Cohesion policy focused on clusterdevelopment, support of innovative investment and site regeneration projects. Alarger-scale strategy is implemented through the Ruhr Association, which is an

excellent example of coordination of spatial planning across administrative borders,including the implementation of large projects and democratic decision making.

Lilles reconversion strategies, supported by national policies as part of thedeconcentration strategy, succeeded in the transformation of its economy with afocus on the tertiary sector and technological development. Striking is the cross-border approach for urban and regional development. Economic development wasachieved through a combination of cluster support in high-tech and growthindustries, and the renewal and regeneration of major sites. Cohesion policysupports RTDI and territorial development.

Bilbao followed a project-based regeneration approach, which was laid out in theStrategic Plan for the Revitalisation of the Bilbao Area in 1991. It focused on flagshipprojects for the reconversion of the port and adjacent land, former mining areas,and other derelict sites, and for new infrastructure and economic growth throughthe service sector. Most of the regeneration effort was assigned to a developmentcorporation and other similar forms of public-private approaches. Bilbaos pathwayto recovery is characterised by the Guggenheim effect, which gave rise to a newimage of the city. Cohesion policy support was significant in quantity and quality Urban, Resider and Renaval were used in the previous periods to push conversion.

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Urban areas previously dependent on coal, steel, textile or machinery have undergonetransformation processes in order to re-establish a sound industrial and economic basis.This chapter presents four cities in four major industrial countries: Essen in the GermanRuhr Area, Manchester in the North-West of England, Lille in the North of France and Bilbaoin the North of Spain. Each of these four cities carries a similar legacy. Their paths to

conversion and recovery have all shown some success, but in none of the cities the oldlevels of jobs and wealth have been fully restored.

In the following sections, the individual approaches taken in these four cities are presented,highlighting the impact of regional change on the urban dimension and the pathways toresearch, innovation and new economic development. A key point to be borne in mind isthat reconversion is an all-encompassing and comprehensive task, where urban planning,economic and infrastructure development, social inclusion and labour market policy, as wellas cultural projects, need to be tackled together. Therefore; there is no blueprint - foreach of the cities a broad narrative is given to avoid fragmentation and any shortcuts to

best practices. Each of these cities represents good practice, as they all accomplished amultiplicity of actions that offered new pathways to development. One of the mostimportant common features is that each of the cities has implemented integratedapproaches to urban development.

Cohesion policy publications tend to focus on individual flagship projects, highlighting theefforts taken to support reconversion. However, it should be emphasised that data onexpenditure and on indicators relating to outputs, results and impacts are collected atprogramme level, but not at any territorial level below the programme level. This is why itis very difficult to attribute any achievements of Cohesion policy to specific regions or urbanareas. Reporting that covers longer periods in a comprehensive manner dealing also withissues outside the field of Cohesion policy - is often lacking. Thus, this chapter seeks toprovide some coherent perspectives on these individual cases.

3.1. Manchester

Manchester is the main economic centre in the North-West of England. The city is borderedby the nine other local authorities of Greater Manchester which form the Association ofGreater Manchester Authorities (AGMA). In addition, in 2011 the Greater ManchesterCombined Authority (GMCA) was established as a top-tier administrative body for the localgovernance of Greater Manchester. Manchester played a significant role in the industrialrevolution in the 18th century with much of its character shaped in the Victorian era. Withthe decline of industry in the 1960s47 its population declined. From 1999 and following a

successful transformation this decline was reversed from 416,400 inhabitants in 1999 to473,000 in 2008. 48 Financial and business services have had a sustained role as keydrivers of growth in the service industries. The city is a transportation hub with aninternational airport. It hosts a number of universities and 64,000 students account for asignificant share of its population.49

47 More than 30 000 manual jobs in manufacturing have been lost between 1966-72 from a small area at thecentre of the conurbation.

48 MCC (2012), Manchester's Local Development Framework Core Strategy Development Plan Document,Manchester City Council, Manchester 2012, p. 8.

49 MCC (2012), p. 37, p. 39.

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3.1.1. Strategy for urban development

Manchester has major strengths in economic terms, which are the result of thetransformation process and the rapid expansion of a number of sectors, includingcommercial and professional services, science and research, culture and media, advancedmanufacturing and ICT. On the other hand the city is still tackling the legacies of a long

period of economic decline. Among the key issues are societal challenges, in particular ahigh share of unemployed, as well as people dependent on income support, disabled, orbelonging to a number of ethnic minority communities. The city is also includes fourneighbourhoods that rank within the most deprived 10% at national level 50.

The expected population increase will be matched by an increase in the number ofhouseholds. The city reports a shortage of housing for certain target groups such as largefamilies, elderly and disabled. Thus, there is an urgent need for diversification of availablehousing. The social housing estates developed in the 1960s and 1970s, are now among thekey challenges for the city with a large number of such estates located in EastManchester.51

In 2012 the City Council adopted the Manchester Core Strategy which is a long-termstrategy for the period 2012-202752. It is based on a confident growth scenario, expectingthe population to reach 581,000 in 2027. As a regional framework the strategy establishesthe overarching priority of economic growth through the creation of knowledge-basedindustries, based on the development of attractive sites. These include digital and creativesectors, financial and business services, biotechnology, engineering and environmentaltechnologies. The strategy also acknowledges the strong link between economy andhousing, i.e. attractive employment sites require also an attractive, diverse housingstock53.

At local level the Manchester Core Strategy defines specific areas of regeneration withhousing being an important element for the revitalisation of areas. There is a great need inManchester, as in a number of urban areas in the UK, to find suitable land for housingdevelopment. The use of the so known brownfield sites - land previously developed but nolonger in use - features in the strategy.54 It considers protection of existing and thedevelopment of business zones in order to safeguard the provision of a wide selection ofbusiness space, offering different types, sizes, quality and value55.

The vital role of the transport system for urban development is self-evident. Theinternational airport functions as major hub with plans for expansion thus becoming apotential focal point for job generation and a catalyst for the regional economy in the

strategy. A second major strategy element related to transport is the further extension ofthe Metrolink network.56

As in many other old industrialised areas rivers and valleys form the major green backboneof the city area. Improvement and appropriate adjustment of leisure purposes is anotherimportant strategy element to generate neighbourhoods of choice57.

50 MCC (2012), p. 9.51 MCC (2012), p. 97.52 MCC (2012).53 MCC (2012), p. 25.54 MCC (2012), p. 97.55 MCC (2012), p. 38.56 MCC (2012), p. 29, p. 32.57 MCC (2012), p. 33.

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